Daniel Knowles writes for the Economist about politics and economics and is @dlknowles on Twitter.

The next stage in solving the eurozone crisis: Germany must start spending

Most people give up chocolate for a New Year's resolution; I'd given up writing about writing about the eurozone crisis. Ever since the European Central Bank started providing unlimited liquidity to Europe's banks, allowing them to buy up the sovereign bonds of the distressed countries, it's got a lot less interesting. Predictably enough, printing money has taken the fun out the daily market tremors. For all the problems it stores up, a free flow of cash reassures jittery bond buyers. Even if a country – let's say Italy – appears insolvent, the appetite remains strong for its bonds, and so there is no point in launching a speculative attack. (That, by the way, is also why a short-term stimulus in Britain would be unlikely to lead to a European-style spike in interest rates.)

However, while the crisis has got less fun, it hasn't gone away. Yesterday, Nicolas Sarkozy and Angela Merkel did something a British prime minister could never get away with: they held a joint TV interview, each fawning on the other. Merkel, who is terrified that the Socialist Francois Hollande might be elected instead of her diminutive partner, is openly supporting Sarkozy. If Merkozy dies, so too does the fiscal compact and Germany's austerity-plus package for Europe. Since the German public wouldn't consent to anything less stringent on those Greek scroungers, the result would be that Merkel would have to start considering a German withdrawal from the euro. And like so many German leaders, Merkel doesn't like having to retreat.

Shame about the Greeks then. The Greeks are refusing the further austerity that the Troika (the EU, the ECB and the IMF) demands. The two big unions in the country have called a general strike, arguing (rightly) that austerity has driven the country into a depression. Greek leaders have one day left to accept the new measures, or they will lose the right to another bailout. Without a bailout, the Greeks will miss a €14.5 billion debt payment due in March, causing a default. If it stayed in the euro, it would then have to adopt austerity anyway, since Greece still has a primary deficit (it spends more than it takes in, even after debt interest). Alternatively, it could leave the euro at short notice, probably causing hyperinflation, unprecedented capital flight and contagion to other European economies. Quite a pickle.

Merkel is not happy with this. She told the reporters yesterday that "time is of the essence" in solving the crisis. "I honestly can't understand how additional days will help." She says that she wants Greece to stay in the euro, but "there can be no deal if the Troika proposals are not implemented." Greece will be bullied into it, no doubt.

But the problem is, the Greeks are right. Austerity in the south, in the north, in the east and in the west cannot solve anything. The Greek economy can only grow, and the Greek debt can only be repaid, if the fundamental problem of divergence in competitiveness is solved. The Greeks need to devalue, but within the euro, they can't, since internal devaluation (wage cuts) only increases the size of their debt as a percentage of GDP. That applies equally to the Italians, the Spanish, the Portuguese and probably the French too. Which is to say that actually, what needs to happen is that the Germans need to revalue – either internally (by increasing wages) or externally (by leaving the euro).

Unlike internal devaluation, internal revaluation ought to be the easiest thing in the world. Internal devaluation means high unemployment and deep structural reform, whereas internal revaluation mostly means more spending. Who objects to higher wages? But the Germans are nervous about their ageing population (they should pipe down – every population in Europe is ageing) and about their precious export industries.

It's time they gave up and booked another Greek holiday. David Cameron knows this – he told the Davos conference that "the flip side of austerity in the deficit countries must be action to put the weight of the surplus countries behind the euro", clearly hinting at a big expansion in German spending. Perhaps he ought to start campaigning with Francois Hollande?